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In Q1FY25, Greenply Industries posted revenue at INR 5.8bn, up 36% YoY and down 3% QoQ (below JMFe by 6%) with a 5 year CAGR +11%).The growth was mainly driven by MDF followed by Plywood. EBITDA at INR 579mn up 114% YoY and flat QoQ. (5 year CAGR +7%) with OPM at 9.9% vs 6.3% YoY and 9.6% QoQ (JMFe OPM at 9.1%) which was largely driven by improvement in MDF realisation due to mix change. PAT at INR 332mn vs 58mn YoY and up 15% QoQ.

*  Plywood delivered decent growth: Despite muted demand and general elections; Plywood business delivered volume growth of c.8.6% YoY to 17.7msm while realisation were down by 1.4% YoY mainly due to price pressure as increase in RM. EBITDA at INR 357mn down 1% YoY and OPM at 7.9% vs 8 7% YoY and 8.5% QoQ; lower EBITDA because of negative operating leverage + high timber prices. Greenply has taken a price hike of c.1- 1.5% in June-24 the effect of the same to be seen in Q2. Also, management expects to take further price hikes in Q2. It has capacity of c.48.4msm and with plant debottlenecking will be further improved by 2.5-3msm. Management also hint on new plywood plant in next 15 months involving a capex of c.INR 1bn. Guided volume growth of c.8-10% and margin to flat in FY25.

*  MDF mix change drive the growth: MDF revenue at INR 1.3bn vs 173mn YoY and up 0.5% QoQ. EBITDA margin was at 16.6% vs loss YoY and 14.1% QoQ (Greenpanel margin at +12.1% vs 20% YoY) improved on the back increase in value added mix (prelaminated board to 22% of sales) and better RM sourcing. Overall realisation improved QoQ by 8% to INR 30,817/CBM. Management guided a volume growth of c.50% and margins c.16% in FY25. Also, it sources its 60% of RM from Gujarat resulting better prices than North. Blended timber cost is at INR 6.1/Kg (North prices are higher by 80paisa/kg while south is cheaper by 50paisa/kg)

*  JV with Samet BV to come from FY27: Greenply highlighted that revenue from the JV with Samet BV (a leading furniture hardware manufacturer in Turkey) will start coming from FY27 onwards. It will invest c.INR 2.5bn in the JV in next 2 years of which up to Q1FY25 invested INR 1.4bn and further capex of INR 500mn expected in FY25. It expect an overall revenue of INR 7bn with above investment and expects revenue of INR 2.5- 3.0bn to be start coming from FY27 onwards and will have EBITDA margins of c.25%.

*  Outlook and Valuation: In MDF: we expect revenue CAGR of c.39% over FY24-26 and margins of c.16%/15.7% in FY25/26 (Q1 FY25 OPM at 16.7%) due to improving demand along with capacity utilisation, increasing the share of value added products, no new large capacity in place, import been slowdown and geographical expansion. In Plywood; with pickup in real estate activities and private capex + product development will support the growth. We expect Plywood rev CAGR of c. 11% over next 2 years. Greenply trades at a P/E of 34x/23x (vs Centuryply 43x/35x) over FY25/26 and we value it at 30x mainly because of strong leadership position in plywood industry and ramping up MDF along with improvement in return ratios. We maintain BUY with a target price of INR 460.

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